New Zealand Unemployment Rate Hits Nine-Year High

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The unemployment rate in New Zealand reached a nine-year high in the third quarter, while the number of unemployed in the country was at a fifteen year-high, Statistics New Zealand said in a report on Thursday.

The unemployment rate stood at 6.5% in the third quarter, half a percentage point higher than the previous quarter. Economists had expected an unemployment rate of 6.4%. A year ago, the unemployment rate stood at 4.3%.

The number of unemployed persons increased by about 12,000 or 9% from the previous quarter to total 150,000, the highest level since the March 1994 quarter. The number of unemployed males increased by 9,000 or 12.9% to 80,000, while the number of unemployed females grew by 3,000 or 5% to 71,000.

The unemployment rate and the number of unemployed has been on an increasing trend for seven straight quarters from the December 2007 quarter, when the unemployment rate was at 3.5%.

Reflecting on the data, Westpac Bank said that the sharp rise in unemployment was not a surprise, as the labor market is still being influenced by the after-effects of the recession just past. "We expect this was the last quarter of sharply rising unemployment," Westpac commented in a note. "For the next year, we forecast the unemployment rate to remain close to its current level, with movements up or down of a couple of tenths of a percent."

The number of employed people decreased by 17,000 or 0.8% sequentially in the third quarter, driven by a fall in male full-time employment. This decrease was partly offset by an increase in female employment during the quarter.

At the same time, the labor force participation rate stood at 68% in the third quarter, down from 68.4% in the preceding quarter, while the number of hours worked fell 0.7% sequentially during the quarter.

"We had expected to see a lift in hours worked, reflecting an increase in economic activity over the quarter," Westpac said. "Such weak hours worked suggests that the economy may have grown by less than our 0.4% third quarter GDP forecast."

Shortly after the release of the unemployment report, Reserve Bank of New Zealand Governor Alan Bollard said both New Zealand and Australia survived the crisis well due to a mix of strong institutions and stimulative policies.

"However, their immediate prospects are different," Bollard said in a speech to the Trans-Tasman Business Circle in Auckland."Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth."

"New Zealand has had a recession, and the pick-up is slower and more vulnerable - a difference financial markets do not appear to appreciate."

"This is particularly evident in the relatively stable cross-rate on foreign exchange markets. If financial markets can't see the differences, they will eventually lose money, and it will hurt the New Zealand economy," Bollard stated.

Bollard added that the New Zealand economy could improve its prospects by taking advantage of Australia's strong future growth potential.

"Australia will likely be a very strong growth market, and could help New Zealand to indirectly benefit from East Asian growth," he said. "Less inflation pressure here will help our competitiveness, assisted by relative exchange rate stability and the spreading Single Economic Market."

The New Zealand dollar plummeted against its major counterparts following the release of unemployment report.

The unemployment rate in New Zealand reached a nine-year high in the third quarter, while the number of unemployed in the country was at a fifteen year-high, Statistics New Zealand said in a report on Thursday. (Market News Provided by RTTNews)